Weekly Market Recap – Week Ending May 22nd, 2020
What Did The Market Indexes Do?
|Dow Jones Industrial Average||+3.4%||24,465.2||-13.4%|
|NASDAQ Composite Index||+3.5%||9,324.6||+4.4%|
|S&P 500 Index||+3.3%||2,955.5||-7.8% |
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Last week, stocks in the major indexes jumped more than 3%. This was a pleasant surprise heading into the holiday weekend since it’s a sign that we’re coming out of troublesome March and flat April. One star was the S&P 500–which reached the highest level it’s seen since the beginning of March, and up over 30% since the third week of March.
This has been a wild ride for the past two months, but this is promising news. All major indexes closed the week up over 3% as people begin to leave home and start resuming semi-normal activities. As always, this will be a trend to watch, but it’s promising to see the NASDAQ continues to be in the green year-to-date.
Expected Earnings — No Longer Relevant in 2020?
The COVID-19 pandemic has prompted a lot of companies to admit they won’t be hitting their earnings forecasts that they previously announced this year. While this isn’t a total surprise, the amount of companies backpedaling is. Nearly 67% of the S&P 500 companies that have discussed full-year expected performance already backed off of those estimates by the end of last week.
I don’t think it’s that expected earnings are no longer relevant, but many companies are throwing the book out on what they thought would happen since nobody could have predicted this. I don’t think it’s anything to be concerned about, and in fact, it’s companies being more honest with themselves and their stakeholders–the coronavirus has had a huge impact on the economy and they’re starting to publicly recognize that so their investors can prepare as necessary.
Crude Oil Continues to Rise
Crude oil prices in the United States went up once again last week. The price of U.S. crude passed $34 per barrel late last week. If you recall, we saw prices hit a historically low level last month–even seeing some futures contracts drop below $0. Thankfully, the price of crude and oil futures have been aligned over the past week–which is a sign that oil is stabilizing a bit.
Crude oil is a key indicator on how the economy is running so it’s nice to see the surge in prices and it’s also great to see futures be aligned with the price of oil. They should really be moving in tandem with one another–which is something we haven’t seen consistently for the past few months.
Small-Caps Continue Their Run
The small-cap trend continued last week as we saw the Russell 2000 Index close up about 8% last week. Small-cap stocks have continued to outperform large-caps this year.
Now might be a great time to get in on smaller companies. This is far from scientific, but we’ve seen a lot of younger and smaller companies adapt a lot better to the changing world after the coronavirus pandemic. Older companies, which tend to be your large-cap stocks, have generally had a more difficult time adapting.
The World’s Second Largest Economy Just Shrank
For the first time ever (this was started in 1994), China has decided not to set a target for its economic growth (GDP) in 2020. China reported last week that their GDP shrank by nearly 7% in the first quarter of 2020. This has primarily been due to the COVID-related restrictions the country has experienced. This isn’t surprising, but the U.S. should take note.
And the Third Largest Economy Shrank, Too
As for the world’s third largest economy–Japan–they announced last week that they have officially fallen into a recession. Their GDP shrank more than 3% in the first quarter of 2020. And late last week, similar to what the U.S. has done, the central bank in Japan announced a $700 billion bill to drive financing for businesses and help offset COVID-19-related losses. Again, not surprising, but many wonder whether the U.S. will see the same.
The Housing Market Reports This Week
We all know the spring and summer are when people get out there and start buying more homes. But what effect will COVID-19 have on the home buying market this year? This week, we’ll get to see reports on home prices and new home sales (Tuesday), as well as a Thursday report that shows data on pending home sales.
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